A simple options trade turned pennies into dollars – and the next move might already be brewing. Let’s rewind the clock to March 31st, 2025.
SPY – the S&P 500 ETF – closed just above $559. Markets weren’t exactly calm as they had been falling for the past month. But the real trigger was yet to come. Trump was about to announce his tariff policy. Separately, tariff talk has been hurting tech stocks. See Meta Stock To $400?
It wasn’t some backroom rumor – it was publicly known, and this created the perfect setup to go “long on volatility” – something not a lot of investors think about. When a shake-up like this happens, volatility spikes.
Long Volatility Setup
It simply means making money when the volatility goes up. How could you have done that? Here is the trade: You could have bought put options on 31st Mar 2025, or if you were unsure of potential direction, hedged it by buying a call too and made it a straddle. And then squared off the trade a week later, bagging a massive sum.
If you had tossed in $1,000 on those puts, you’d be walking away with $30,000. Sure, you might not want to risk that much on options, but even a $100 risk could have made you $3,000 in a week. Not a bad trade, right?
But Nobody Could Have Predicted That Drop
True. Nobody has a crystal ball. But that’s the wrong question. The better question is: Was it reasonable to expect something to happen? And the answer is: Absolutely!
The market had priced in some tension, but it wasn’t bracing for a real shock. And if you’ve traded through enough macro events – tariff talk, Fed surprises, geopolitical curveballs – you know that buying options during uncertain times can pay off big. Not always. But often enough to make it worth a shot. Buying puts wasn’t a crazy gamble – it was a calculated hedge against known risk. And if you were more balanced, even buying a straddle (put + call) would’ve given you upside either way.
Can It Happen Again?
SPY closed at just under $538 yesterday, 15th Apr 2025. The markets are still twitchy, the volatility has crept higher over the last three months, and option prices are reflecting that.
Here’s what’s interesting: If you look at at-the-money straddles (call and put premiums combined for $538 strike – current SPY levels) expiring Tuesday next week, they’re priced around $14.70 or a little under 3% of the current SPY price. This implies the market expects a move of a little under 3% in either direction.
Is that realistic? Maybe. Maybe not. But here’s the thing: Short-term volatilities in the market are not uncommon and are often challenging to navigate. However, long-term outperformance is hopefully what matters to you. If so, consider investing in Trefis High Quality (HQ) Portfolio, which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics
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